Recap Of The Week?s Top Stories?
The third largest steel maker inChina seems to be headlining news today following allegations that the company participated in price dumping in order to boost export in the US and gain significant market share. Deeming the notices as “unfair”, Wuhan Iron & Steel Co. is blaming global prices rather than corporate strategy in driving the volume of exports higher.
Political Tensions Heighten, Chinese Steel Maker Charged With Price Dumping
The third largest steel maker in China seems to be headlining news today following allegations that the company participated in price dumping in order to boost export in the US and gain significant market share. Deeming the notices as “unfair”, Wuhan Iron & Steel Co. is blaming global prices rather than corporate strategy in driving the volume of exports higher. “Chinese steel exports have soared because of higher global prices and demand”, according to the Company Secretary Zhao Hao. “Most of the Chinese steel products were sold in China , and only a small proportion are sold overseas.” The news comes as no surprise as previous sanctions, although not imposed by US policymakers, have cited steel makers as the next target following the recently imposed tariffs on coated paper products from the country. A clear example of the measures US Treasury Secretary Paulson noted earlier this week, further bantering and jawboning should be expected until further concessions are to be made by Chinese policy officials. The culmination of such measures will likely boost speculation in the Chinese yuan, with plenty of bidders smelling the sweet scents of revaluation. Incidentally, the market will, as a result, likely turn to the upcoming possibility of currency intervention by Treasury officials.
Chinese Yuan Declines For First Weekly Loss
China?s local currency had the weakest close in almost three weeks today, following speculation that the country?s government will continue to promote a two way trade in the underlying currency. Although it has been conceded that the government will eventually allow the Chinese yuan to appreciate gradually, it is also understood that heads of state will also seek to partially stem rapid speculative forces in the market. The underlying idea is in line with recent comments by Zuo Xiaolei, chief economist at China Galaxy Securities Co. According to Zuo, “China is after a flexible exchange rate and wishes that the yuan not move in one direction”. As a result, the currency dropped 0.1 percent on the week, falling the most since April 13th against the US dollar to 7.6550. However, speculation does remain high in the market on the side of yuan bidding. Attributed to the notion were continued requests from US Treasury Secretary Paulson. Yesterday, the Secretary that has garnered the most attention in recent months, suggested that “there?s really more need to move the renminbi than in July 2005” as it is “strongly in their (Chinese officials) best interest to move”.
Deputy Governor Wu Sees Market Rise As “Inevitable”
In response to recent routs in Chinese shares, over the past couple of sessions, the People?s Bank of China Deputy Governor Wu Xiaoling commented that the current advance in shares is “inevitable” and noted that investors should have confidence in the current system and Chinese economy. “In a situation where the economy is growing, the stock market?s advance is inevitable and long term gains in the Chinese market is inevitable.” Incidentally, the comments have a considerably different tone from a couple of months ago, when policy makers were indicating a stock market bubble in the Chinese markets. However, it seems the tide has changed as leaders are now viewing the bigger picture: further statements of a larger than life speculation may open the road to a stock market crash. The idea has sparked other comments similar to Wu?s in recent days including the deputy director of the national pension program. According to Gao Xiqing China?s markets enjoy “good long term prospects.” Subsequently, it was speculated yesterday that the government is in works of establishing a fund in order to stem any precipitous declines in the overall benchmark index. The rumor helped to spark some support from the otherwise bearish market fall in the morning trade.
Amazon Increases Investment In Joyo
Yet another US company looks to increase investment in China, and that company is the online seller Amazon.com. Today, company officials released that the US company will increase its investment in the acquired Joyo.com, one of the leading online shopping websites in China. Attributed to the increase in investment stems from the fact that Joyo has been on a tear since Amazon purchased the China based company for $75 million in 2004. Incidentally, the investment is set to potentially boost Amazon?s overall earnings, with 54 percent of the company?s sales being outside the United States.